Agriculture and FoodDevelopmentEconomicsEducationEmploymentEnergyEnvironmentFinance and InvestmentGovernanceIndustry and ServicesNuclear EnergyScience and TechnologySocial Issues/Migration/HealthTaxationTradeTransportUrban, Rural and Regional Development

OECD Economics Department Working Papers

Working papers from the Economics Department of the OECD that cover the full range of the Department’s work including the economic situation, policy analysis and projections; fiscal policy, public expenditure and taxation; and structural issues including ageing, growth and productivity, migration, environment, human capital, housing, trade and investment, labour markets, regulatory reform, competition, health, and other issues.

The views expressed in these papers are those of the author(s) and do not necessarily reflect those of the OECD or of the governments of its member countries.

Public Spending Efficiency in the Czech Republic

Fiscal Policy Framework and the Main Spending Areas of Pensions and Healthcare

The Czech fiscal position is generally sound and policy making is prudent. However, the fiscal framework was not strong enough to contain spending in the upturn and it would benefit from independent budget oversight. An anchor for the fiscal policy would be helpful, in the form of an explicit debt target coupled with corresponding spending ceilings and deficit targets.

The ongoing fiscal consolidation, spending pressures and an already relatively high average tax burden necessitate public sector efficiency improvements. There is scope for improvement in the management of government spending, mainly by enhancing transparency, introducing performance-oriented budget indicators at both central and local levels, improving the management of state-owned enterprises and developing the procurement practices of the public sector.

Legislated increases in the retirement age will improve pension system sustainability. A new defined contribution tier is being introduced which should help to diversify future retirement income. At the same time, there is uncertainty about the number of participants who will decide to divert their contribution to the new tier and hence about the implications for revenues in the existing defined benefit pension tier. Also, attention should be taken regarding administrative costs of the new tier, since these can have a significant impact on future replacement rates and therefore public support for it. With more emphasis on private savings, the financial literacy of the population also needs to be stepped up.

In healthcare the authorities plan to continue improving the multi-insurer model through incremental reforms such as limiting pharmaceutical costs and improving provider-payment system. The potential for efficiency improvement in healthcare network planning and better care management should be explored, while ensuring that insurers and health providers are given the correct incentives.

This working paper relates to the 2011 Economic Survey of the Czech Republic, www.oecd.org/eco/surveys/czech.

JEL:
H72: Public Economics / State and Local Government; Intergovernmental Relations / State and Local Budget and Expenditures;
H57: Public Economics / National Government Expenditures and Related Policies / National Government Expenditures and Related Policies: Procurement;
H55: Public Economics / National Government Expenditures and Related Policies / Social Security and Public Pensions;
H61: Public Economics / National Budget, Deficit, and Debt / National Budget; Budget Systems;
H51: Public Economics / National Government Expenditures and Related Policies / National Government Expenditures and Health